Altcoins – Great investment opportunity or a new bubble

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Cryptocurrency: A New Investment Opportunity?

Lee, D. K. C., Guo, L., & Wang, Y. (2020). Cryptocurrency: A new investment opportunity?. Journal of Alternative Investments, 20(3), 16-40. https://doi.org/10.3905/jai.2020.20.3.016.

Posted: 30 Jun 2020 Last revised: 1 Jul 2020

David Lee Kuo Chuen

Singapore University of Social Sciences (SUSS)

Li Guo

Fudan University – School of Economics; Shanghai Institute of International Finance and Economics

Yu Wang

Singapore University of Social Sciences (SUSS)

Date Written: August 24, 2020

Abstract

Bitcoin was the first cryptocurrency using blockchain and has been the market leader since the first bitcoin was mined in 2009. After the birth of bitcoin in the Genesis Block, more than 1000 altcoins and crypto-tokens have been created with at least 919 trading actively on unregulated or registered exchanges. This entire class of cryptocurrency and tokens has been classified by some tax authorities as having the same status as commodities. If cryptocurrency is viewed in the same class as commodities, how different it is in terms of its risk and return structure? This paper sets out to help the readers to understand cryptocurrencies, and to explore the risk and return characteristics using a portfolio of cryptocurrency represented by the CRIX Index. Substantial discussions are centred on bitcoin and its close variants. Some questions are raised about the potential of cryptocurrencies as an investment class. Results show that the correlations between the cryptocurrencies and traditional assets are low, and incorporation of CRIX index will improve the performance of the portfolio that consists mainly of mainstream assets. Sentiment analysis also indicates the CRIX index has a relatively high Sharpe ratio. While we may view the results with care, a new form of financing for crypto and blockchain start-ups is born. The disruption brought about by bitcoin may be felt beyond payments through what is known as Initial Crypto-Token Offering (ICO) or Initial Token Sales (ITS).

Keywords: Cryptocurrency, Bitcoin, Altcoin, Alternative Investment, Crypto-Token

JEL Classification: G02, G10, G11, G12

MoonLite Providing A Novel Cryptocurrency Mining Approach With Great Investment Opportunities

January 10, 2020

Over the last half a decade, cryptocurrency mining has grown by almost 50% annually with a peak rise of almost 90% year on year in 2020. Such growth has spilled over to allied sectors with the computer hardware market seeing a corresponding surge. For instance, the lead computer graphics card manufacturer with a clear lead in the market saw their turnover in the third quarter of 2020 rise by almost 75% majorly due to demand from miners of Ethereum and other altcoins.

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There is a projected rise in 2020, and aside from the surge in share prices of firms making mining hardware, the MoonLite Project is providing a new approach to cryptocurrency mining that benefits not just a cross-section of associated industries, but the mining ecosystem as well.

What is MoonLite and Why Does It Matter?

The MoonLite Project is a large-scale cryptocurrency mining operation with bases in Iceland. It will initially concentrate on Bitcoin and its various derivatives, Ethereum, Litecoin, and Dash. The operations will utilize 100% green energy with an emphasis on wind, hydro and geothermal-generated power. Iceland is an automatic choice for the project’s initial data center because it has a considerably lower energy tariff for industrial connections and a secure and finalized power delivery contract that promises fixed rates for several years. At just US$ 0.043 per kWh, Iceland’s energy tariffs are among the lowest in the world.

Also, the country is politically stable, and its overall climatic conditions do not necessitate intensive cooling of the cryptocurrency mining hardware, a fact that further lowers the total cost of the mining operations.

The approach by the MoonLite Project is especially revolutionizing since the industry has not witnessed efforts geared towards large-scale mining that targets the projected future demand for crypto coins. And, while the Envion Project proposes an almost similar model aimed at making the cryptocurrency mining process environmentally friendly, its parameters only address environmental effects of mining and not the scaling up production. The MoonLite Project, as such, is the first of its kind in terms of seeking to meet the estimated future demand for cryptocurrencies.

The project is not only revolutionary in its context but also in its operational structure. For instance, the project’s build program has room for 15,000 miners in its first data center, powered by an energy supply hedged on a 12-year fixed rate. Moreover, the entire project is run by a competent operational team with assistance from an equally talented board of advisors.

Investment Opportunities Available

The MoonLite Project ICO isn’t on until February 28, 2020. However, the early bird offer is already out for investors that want to participate in the pre-sale. Aside from joining the project on the ground floor, investors that choose this path shall also enjoy between 100% and 300% token bonus depending on contribution levels. Participants that take part in this Pre-Swap Phase will be prioritized during the Token Buy-Back program. In addition, they have more legroom as they can participate using either their Visa or MasterCard or their choice of up to six different cryptocurrencies.

How to Hop On Board

Investors that are looking to make the most of the project can opt in now by securing the tokens through the MoonLite Sales Portal. This portal allows interested investors to use up to seven different, convenient payment options to buy the tokens in a flawless process that lasts just under a minute.

Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.

Explaining the new cryptocurrency bubble—and why it might not be all bad

Investors are pouring tens of millions of dollars into new cryptocurrencies.

Timothy B. Lee – Oct 5, 2020 12:00 pm UTC

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You’re going to hear a lot about initial coin offerings (ICOs) in the coming months. As investors have poured more and more money into newly created virtual currencies, they have created a gold-rush mentality. In recent months, some ICOs have raised tens of millions of dollars, and in early October the cryptocurrency market as a whole was worth about $140 billion.

Some ICOs have been for serious projects trying to solve hard technical problems. Others seemed like little more than cynical attempts to cash in on the speculative boom. Celebrities like Paris Hilton, Floyd Mayweather, and Ghostface Killah have endorsed ICOs The launch video for the cryptocurrency Hilton endorsed, called LydianCoin, consisted entirely of cliches: “Purpose isn’t defined by what you want to achieve but what you want to live for to achieve happiness.” (Hilton has since deleted her tweet endorsing LydianCoin.)

But throughout 2020 and 2020, ICOs of all shapes and sizes have repeatedly set new fundraising records as existing cryptocurrencies like Bitcoin and ether simultaneously soared in value. Experts we talked to—like Peter Van Valkenburgh, an expert at a blockchain advocacy group called Coin Center—didn’t think that was a coincidence.

“We’re probably in a bubble,” Van Valkenburgh told Ars in an early September interview. But even if the current boom does turn out to be a bubble, Van Valkenburgh argues that this isn’t necessarily a bad thing.

“You can look at bubbles as being socially productive,” he told Ars. Bubbles “allocate capital to long shot, paradigm-shifting innovation” instead of incremental improvements to existing technologies. The dotcom bubble created a lot of failed companies—but it also created Amazon, eBay, and Google.

The ICO boom is a classic speculative bubble

Paul Graham is a well-known Silicon Valley investor who co-founded one of the first e-commerce companies and then sold it to Yahoo in 1998. From there, he became a Yahoo employee, which gave him an inside look at the dynamics of the dotcom boom, which Graham described in a 2020 essay as a “de facto Ponzi scheme”:

Investors were excited about the Internet. One reason they were excited was Yahoo’s revenue growth. So they invested in new Internet startups. The startups then used the money to buy ads on Yahoo to get traffic. Which caused yet more revenue growth for Yahoo, and further convinced investors the Internet was worth investing in. When I realized this one day, sitting in my cubicle, I jumped up like Archimedes in his bathtub, except instead of “Eureka!” I was shouting “Sell!”

Something very similar has been happening in the Blockchain world, and this story begins with Ethereum. Today, it’s the second most popular cryptocurrency after Bitcoin. Ethereum’s cryptocurrency, called ether, was offered for sale months before the launch of the Ethereum network. The presale concluded in August 2020, and it turned out to be a phenomenal deal for buyers. Since the July 2020 launch of the Ethereum network, the value of ether has risen more than 200-fold.

Seeing this success, a lot of other cryptocurrency founders have followed this approach in the last two years. The strategy has come to be known as an initial coin offering.

ICO founders tend to come from within the cryptocurrency world. Blockchain investors are more likely to take a project seriously if it’s led by veterans of previous projects. Founders usually follow the template set by Ethereum: the project’s vision is laid out in a white paper that describes how the new network protocol will operate. They set up a website with instructions for registering for the ICO and sending money—usually in the form of Bitcoins or Ethereum—to the company. ICOs generally run for a few days, but some of the most popular ones have been halted within hours or minutes as they became over-subscribed and quickly reached their fundraising target.

People buy into new ICOs in the hopes of getting in at the ground floor of the next Bitcoin or Ethereum, just as investors in the IPOs of the late 1990s hoped they were buying shares in the next Yahoo. But the parallels to the dotcom boom don’t stop there.

Legal and technical obstacles make it tricky to directly sell a new cryptocurrency for dollars, euros, or other conventional currencies. So ICOs almost always use bitcoins or ether as a medium of exchange. People first convert their dollars into bitcoins, then use the bitcoins to buy the new cryptocurrency. That creates demand for bitcoins, pushing up their value.

And that’s not all. The Ethereum blockchain is a general-purpose computing platform, and a lot of the new tokens being offered for sale are actually built on top of the Ethereum blockchain. It takes ether to run software on the Ethereum network, so the more projects are built on top of Ethereum, the higher the demand for ether.

The result is a powerful feedback loop. Token creators point to the success of the Ethereum presale as evidence that token presales are a good investment—much as startup investors in the 1990s pointed to Yahoo’s success to justify their own fundraising. At the same time, growing ICO activity boosts demand for ether (and Bitcoin), creating an even greater sense of momentum in the blockchain world as a whole.

This feedback loop is likely one of the reasons the price of bitcoins and ether soared over the last year. At one recent point, the price of Bitcoin had risen six-fold from a year earlier, while the price of ether had risen by a factor of 20 in one year.

The rising price of Bitcoin and Ethereum also means that early investors in these currencies have a lot of paper profits they can throw at new projects—just as dotcom millionaires often became investors in subsequent ventures. “There’s a lot of new wealth,” blockchain investor William Mougayar told Ars. “Everyone who’s gaining from it is being very generous, they’re re-circulating the gains into these ICOs.”

Investment Opportunities

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There are investment opportunities all around you. But what is an investment opportunity? Simply put, it’s any vehicle you can use to make money with your money.

You’re probably familiar with the simplest investment opportunity: a savings account. You get interest for having money in the account. But it’s likely not very much – just a few pennies every month. There are absolutely bigger and better opportunities!

Here are some of the numerous options out there, waiting for you to tap into. There’s something for everyone, no matter your knowledge of investments, tolerance for risk or outlook for the future.

Listen to the audio version of this article:

Types of Investment Opportunities

Stocks

Stocks are one of the simplest investment opportunities to understand. When you buy shares of a publicly traded company, you’re buying a piece of that company’s future success (or failure). You make money as the stock price rises and lose money as it falls.

Of course, stocks can get complicated fast. There are several ways to make money outside of selling a stock for a higher price than you paid for it. There are also different stock investing strategies, like growth investing, value investing, and dividend investing. You’ll also need to consider buying individual shares or an index fund (or some combination of both).

This is one of the broadest opportunities in the stock market. There’s enough diversity between companies and sectors to build a stable, diversified portfolio and grow your wealth.

The performance of the stock market can be measured by the movement of indexes such as the Dow Jones Industrial Average and the S&P 500.

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ETFs

If you want to invest in stocks, but you’re not confident in picking individual companies, no problem. Exchange-traded funds (ETFs) are a great investment opportunity to own stocks without having to pick them individually. Instead, they use a “basket” approach.

Your investment in an ETF is actually an investment in a collection of companies, often with a theme. For example, an airline ETF may hold shares of 12 companies all specific to the airline field. Or a growth stock-investing ETF may have 30 companies across sectors with the very best growth prospects. You can even invest in REIT ETFs. Investing in an ETF means getting fractional shares of each company through the fund vehicle. You have to pick only the market, strategy or sector you want to invest in, not the individual stocks.

ETFs are also incredibly cost- and tax-efficient. Most have very low fees – and some are even free. Although ETFs also offer more speculative inverse and leveraged options, in general, they can be a wonderful way to hedge and are great for people with moderate risk tolerance. You can learn more about the innovative world of ETFs from Investment U’s ETF Expert Nicholas Vardy.

Bonds, Fixed Income and Money Market Accounts

Slow and steady wins the race. Bonds, fixed income and money market accounts are far from exciting, but they’re among the most stable investment opportunities.

Fixed income investments are predictable, making them popular among investors with low risk tolerance. Buying a bond with a 3% interest rate and a 10-year maturity date is about as straightforward as it gets in the investing world. With these types of investment opportunities, you sacrifice big gains for stability. Often, they’re part of a larger asset allocation strategy and a great way to tamp down overall risk.

The downside to most fixed income investments is illiquidity. Investing in bonds and money market accounts means you can’t access your money without penalty until the maturity date. The good news is fixed income investments come in a broad range of vesting periods – anywhere from a month or two to a decade or more.

There’s no one who understands bonds better than Investment U’s contributing Bond Expert Steve McDonald. You can check out his articles here.

Real Estate

In the immortal words of the Mark Twain, “Buy land, they’re not making it anymore.”

It’s a witty quip with a lot of truth to it. Real estate is a great investment opportunity because there’s a finite amount of it.

Not only that, but it has tangible value. And there are so many ways to invest in real estate. You can buy rental property and let someone else pay down the mortgage while you benefit from the equity. Or you can buy a run-down property, fix it up and flip it for a quick profit. You can even put money into a real estate investment trust (REIT) if you don’t want to deal with physical property.

Real estate has cycles just like any other market. Get in at the right time and you can ride a property investment to the top of the cycle and sell. Or, if you’ve got a long-term mindset, real estate is a great buy-and-hold asset. Either way, it’s one of the most stable investments out there.

That’s why our contributing Income Expert Marc Lichtenfeld regularly discusses real estate investing.

Commodities and Gold

You’ve probably seen “cash for gold” billboards or store signs. There’s a reason these places are willing to pay you for your precious metals – because they have real value! Like real estate, there’s a finite amount of gold, silver, platinum and precious metals in the world. Gold in particular has value because it’s a currency independent of any national currency that may be rising or falling.

Commodities like gold and other precious metals are tied to the stock market but operate very independently. Often the price of gold and commodities will rise as traditional stocks fall. Buying commodities is a hedge against a downturn in the stock market.

You can buy physical gold and other precious metals in the form of bullion, but it’s much more practical to invest in a commodity-backed index.

Mutual Funds

The more capital you have invested, the more you’re going to make. Unfortunately, not everyone has $100,000 laying around to invest. Most people just have a few thousand dollars to spare. That’s where mutual funds come in.

A mutual fund pools the capital of many people and invests the lump sum. You might have only enough to buy a few shares of a few companies by yourself. As part of a mutual fund, you’re vested in a huge portfolio that’s diversified and well-managed. Plus, if every member of the fund contributes regularly, earnings grow consistently. It’s a great way to kickstart your investment earnings through economies of scale.

Peer-to-Peer Lending

Peer-to-peer (P2P) lending is a great alternative to loans from traditional banking institutions. Instead, borrowers can raise capital from individual lenders in smaller, incremental amounts.

On the flip side, P2P lending is a great investment vehicle. If you’re the lender, you’re able to charge interest on the amount you’re loaning – as little as 2% or as much as 8%, on average. You’ll get your initial investment back over the duration of the repayment period, along with the interest. Factor in fees for late or missed payments and your investment could have substantial returns.

P2P lending can be as simple as lending a friend $100 or as risky as lending $10,000 to an entrepreneur through an online lending platform. Risk and reward vary with each lending opportunity, so it’s important to observe each situation carefully.

Startups and IPOs

Startup investments are a great way to make money on someone else’s great idea. Of course, they’re also risky for that same reason – not every great idea pans out.

Startup investment opportunities come in all shapes and sizes. You might put a few thousand dollars into a friend’s local brick-and-mortar business to buy a stake in future sales. Or you might pool your funds with an investment group to buy 20% of a hot tech startup. Either way, you’re buying access to future profits. As a result, startup investments are a long play.

In the same realm, initial public offerings (IPOs) are a great way to cash in on early-stage company investments. Owning part of a company that goes public on the stock market means being compensated for the value of your ownership as share prices rise. For more on where to begin with startup (and cryptocurrency) investing, check out the writings from Investment U contributors and Co-Founders of Early Investing, Adam Sharp and Andy Gordon.

Art and Collectibles

Art and collectibles are amazing investment opportunities for someone who understands their worth. But you need to know how to physically care for these items and where to find legitimate buyers and sellers.

One-of-a-kind paintings, sculptures, photographs and other works often sell for as much as someone else is willing to pay for them. For those who value art, the sum can be quite a lot. The same goes for memorabilia. An autographed playbill, a mint baseball card, a limited-edition collector’s item – they all have value to the right person. Finding that person will often net you far more than you originally paid.

Choose Your Investment Opportunities Wisely

As you can see, there are plenty of diverse investment opportunities out there! Finding the right one for you depends on where you feel most comfortable putting your money. Look at your tolerance for risk, the amount you want to invest and your timeline for investment. Then choose the investment that best matches your outlook.

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